There are only 2 ways to survive the hedge fund reckoning

If your hedge fund is going to survive this brutal period for the
industry, it's going to take either legendary talent, or an
out-of-this-world investment idea with no correlation to the
market.

So either your ability or your idea has to be freakish in
nature.

Otherwise — as Josh Barro and I discussed with
SkyBridge Capital CEO Anthony Scaramucci on their podcast,
Hard Pass — you're
likely going to get swept away in the wash out
everyone says is here.

"What I think that'll end up happening is that there will be a
consolidation in the number of hedge fund managers, but I
actually think the asset totals will go up," Scaramucci said.

SkyBridge is an investment firm with about $13 billion assets
under management. It specializes in helping institutional
investors create a mix of hedge fund strategies that will
generate alpha — outsize returns uncorrelated to the market — for
them. Alpha, however, is harder and harder to find these days.

That doesn't mean hedge funds are dead, though, it just means
that weaker managers are about to be winnowed out. Scaramucci
believes that because over a market cycle of six to seven years,
really talented hedge fund managers out there can still generate
solid returns without the volatility of the stock market.

But again, during this difficult period especially, you're going
to have to be really uncorrelated from the market, and that means
thinking really outside the box.

That means a plain vanilla long-short equity strategy is not
going to impress investors unless you have freakish talent. Hedge
funds have to offer something more exotic with their strategies.
These days, even the veterans in the game —
like Paul Tudor Jones of Tudor Investment Corp — are lowering
their fees to make up for their lack of returns.

"Listen, SkyBridge is out there negotiating fee discounts for our
clients. And there is pressure on fees, and fees have to come
down," Scaramucci said on Hard Pass. "You can't justify in a
low-return environment, mediocre performance, and super-high
fees."

So start thinking weird.

For more on how out-of-the-ordinary thinking is required to win
in this market, listen to Scaramucci, Linette Lopez, and Josh
Barro on this week's Hard Pass: